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Legal Issues in Real Estate Development

The Grove Hotel March 4, 2020

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Photo Credit: Keller Williams Realty Boise

Title IssuesA Presentation for the Idaho State Bar Real Property Section

March 4, 2020

Tayler W. Tibbitts

© Tayler W. Tibbitts

Overview

Mechanic’s Lien / Broken Priority Issues

Lack of Probate Affidavits

Non-judicial foreclosure of HOA liens

Common Commercial Title Policy

Endorsement



Hypothetical:

Borrower receives approval from Lender for a construction loan on a new building.

Construction loan has not yet closed and title insurance has not yet been issued.

However, Borrower takes approval of financing from Lender as green light to begin work on the project. Architects, engineers, excavators, and concrete workers all perform work on the project before the loan closes.



Idaho’s Recording Act

I.C. § 55-812 – “Every conveyance of real property ... is void as against any subsequent purchaser or mortgagee of the same property, or any part thereof, in good faith and for a valuable consideration, whose conveyance is first duly recorded.” (Race-Notice)



Priority of Purchase Money Mortgage

I.C. § 45-112 – “A mortgage [or deed of trust] given for the price of real property, at the time of its conveyance, has priority over all other liens created against the purchaser, subject to the operation of the recording laws.”



Who can file a mechanic’s lien?

I.C. § 45-501 – every person performing labor

upon or furnishing materials to be used in

construction project on land, and including

professional engineers, licensed surveyors



Priority of Mechanic’s Lien

I.C. § 45-506 – Mechanic’s Liens “are preferred to anylien, mortgage or other encumbrance, which my have attached subsequent to the time when” construction was commenced (emphasis added).

Result: Work commenced prior to the closing of the construction loan may lead to liens recorded after closing on the construction loan that would nevertheless have priority over the deed of trust or mortgage.



How to protect against mechanic’s lien priority issues?

Don’t start construction before your construction loan closes.

Obtain an extended coverage title insurance policy (may have additional requirements, i.e. a site inspection and survey)

Coordinate a construction disbursement process with borrower, builder, banker and title company that clearly assigns the responsibility of collecting mechanic’s lien waivers with each disbursement of loan funds.

Ensure mechanic’s lien waivers have been properly collected from all contractors, subcontractors and suppliers during construction before closing on the permanent financing.



Other Mechanic’s Lien Requirements to be Aware of:

A mechanic’s lien must be filed/recorded and properly served “within ninety (90) days after the completion of the labor or services, or furnishing of materials.”

“No [mechanic’s] lien … binds any building … improvement or structure for a longer period than six (6) months after the claim has been filed, unless proceedings be commenced in a proper court within that time to enforce such lien.”


Lack of Probate Affidavit

Hypothetical:

Mr. and Mrs. Smith passed away in 2001 and

2015 respectively. The time for probate has

passed. Both had wills that were never

probated. One son (out of four) has signed a

purchase and sale agreement to sell Mr. and

Mrs. Smith’s old home, and their names are still

in title. How do you close this transaction?



General probate requirement:

I.C. § 15-3-102 - “[T]o be effective to prove the transfer of any property

or to nominate an executor, a will must be declared to be valid by an

order of informal probate by the registrar, or an adjudication of probate

by the court….”

I.C. § 15-3-103 – “[T]o acquire the powers and undertake the duties and

liabilities of a personal representative of a decedent, a person must be

appointed by order of the court or registrar, qualify and be issued

letters.”

Generally must be initiated within three years of decedent’s death. I.C. §

15-3-301.



Petition for Summary Administration:

I.C. § 15-3-1205 – Where decedent died with or

without a will and left a surviving spouse as the

sole devisee or beneficiary, surviving spouse

may file a verified petition setting forth the

marriage and death and that he/she is sole

devisee or heir.



Collection of Personal Property by Affidavit:

I.C. § 15-3-1201 – Lack of probate affidavit may be used where:

FMV of entire estate does not exceed $100,000

Thirty days have elapsed since death

No application or petition for the appointment of a personal

representative or for summary administration is pending

Claiming successor is entitled to payment or delivery of the property



Marketable Title – free and clear of any defects or clouds that a reasonable buyer would find objectionable (not perfect, but no “hazard of litigation”).

VS.

Insurable Title – may contain some cloud or defect that would otherwise make title unmarketable, but a reputable title insurer has been informed of the defect and agrees to offer title insurance that affirmatively covers the buyer (does not except the defect from title coverage).



Exception (expanded) swallowing the rule?

Counties in Idaho have been accepting the Lack of Probate Affidavit to transfer real property ownership with respect to tax records

Title insurance underwriters, assuming the above, are willing to insure the transfer of real property using a lack of probate affidavit when the affiant is the surviving spouse.

Haven’t dealt directly with the situation in which the affidavit is used to transfer property to non-surviving spouse heirs, but have seen Idaho counties accept these affidavits for the above purpose of updating their tax records, which may be enough to get a title insurance underwriter to follow along.



Hypothetical:

Homeowner fails to pay annual HOA assessment as well as fines for failing to mow

lawn, over a 12-month period ($700 assessment, $250 in fines).

HOA files lien as set forth in CCRs and within authority given in HOA’s organizing

documents.

After efforts to recover the amount of the lien fail, HOA then attempts to non-

judicially foreclose on the lien, following the process set forth in I.C. § 45-1506.

No trustee’s sale guarantee was obtained as part of the foreclosure process, and

buyer at said foreclosure sale pays $175,000, knowing that there is a first position

deed of trust of $75,000 encumbering the property, but not knowing there is also a

$40,000 HELOC as well (both of record).

Would an Idaho title company insure this transaction?



Some state’s have statutes that specifically provide for non-judicial foreclosure of HOA liens.

Nevada (N.R.S. § 116.3116):

HOA lien for assessments “is prior to all other liens and encumbrances … except”

Liens and encumbrances recorded before CCRs;

First security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent;

Lien for real estate taxes and other governmental assessments

However, the HOA lien is also prior to all first security interests to the extent any of the charges incurred by the association become due during the nine months immediately preceding institution of an action to enforce the lien.

And non-judicial foreclosure is allowed as means to recover on the lien. (N.R.S. § 116.31162)



HOA lien rights in Idaho:

I.C. § 45-810:

HOA has a lien upon an individual lot for unpaid assessments accrued in the previous twelve months against a lot for the reasonable costs incurred in the maintenance of the common areas maintained by the association.

Claim must be verified and recorded and then served within five business days after recording

The lien may continue in force for a period of time not to exceed one year from the date of filing, but it may be extended for one additional year by the recording of a written extension signed by the HOA

“An action to recover a money judgment for unpaid assessments may be maintained without foreclosing or waiving the lien securing the claim for unpaid assessments.”

Silent with respect to the availability of non-judicial foreclosure.



Idaho’s non-judicial foreclosure statute:

I.C. § 45-1506: “A trust deed may be foreclosed on in the manner provided in this section.” (emphasis added)

Answer to the hypo: title departments and underwriters will be checking Trustee’s Deeds to ensure that the non-judicial foreclosure was conducted within the purview of the statutory framework; if used to foreclose an HOA lien, it is unlikely that a title company will insure.



Endorsements Explained

ALTA 3-06 – Zoning – Unimproved Land – 10% of title insurance premium (min.

$100; goes up to 20% for completed structure or land under development)




ALTA 5-06 – Planned Unit Development - $75





ALTA 8.2-06 – Environmental Protection Lien - $25 for commercial




ALTA 9-06 – Restrictions, Encroachments, Minerals – Loan Policy - $40




ALTA 17-06 – Access and Entry - $200




ALTA 19-06 – Contiguity – Multiple Parcels – 5%, min. $50




ALTA 22-06 – Location - $100 extended owners; $0 if concurrent with policy




ALTA 37-06 – Assignments of Rents or Leases – 10% ($75 min./$300 max)




ALTA 41.3-06 – Water – Land under Development – 5% ($40 min./$1000 max)

The End.

Tayler W. Tibbitts

General Counsel / Commercial Escrow

Officer

Empire Title

[email protected]

208-389-6905

mailto:[email protected]

Tel: 855-277-5307 www.green-em.com

Exceptional Reporting Unparalleled Service

Environmental Due Diligence

Presented by:

Jonathan GreenPresident

Green Environmental Management

www.aeiconsultants.comwww.green-em.com.comTel: 855-277-5307 www.green-em.com

Objectives

❖ Recognize reports meeting ASTM E1527-13 and the All Appropriate Inquiries Rule (40 CFR 312)

❖ High-risk properties

❖ Proposed changes coming in 2020/2021


Phase I ESA Reports

❖ Proper due diligence must be conducted in order toqualify for defenses to the ComprehensiveEnvironmental Response Compensation and LiabilityAct (“CERCLA” or “Superfund”) liability

❖ CERCLA creates liability for the cleanup of hazardoussubstance contamination for owners and operators ofreal property, without regard to fault

❖ Defenses to CERCLA are afforded ONLY by a duediligence process conducted in adherence to the AAIRule (“All Appropriate Inquiries – 40 CFR 312.20)


What are the Defenses to CERCLA?

❖ Innocent Landowner Defense – acquire propertywithout knowledge of contamination;

❖ Bona Fide Prospective Purchaser Exemption – acquireproperty after January 11, 2002 with knowledge ofcontamination; and

❖ Contiguous Landowner Defense – acquire propertywithout knowledge of contamination from neighboringproperty.


Continued Viability of Phase I ESA

❖ An environmental site assessment meeting orexceeding the ASTM E1527 standard and completedless than 180 days prior to the date of acquisition ofthe property or (for transactions not involving anacquisition) the date of the intended transaction ispresumed to be valid.

❖ If within this period the assessment will be used by athird party different than the user for whom theassessment was originally prepared, the subsequentuser must also satisfy the User’s Responsibilities.


Phase I ESA Reports

❖ User & User provided information

❖ Owner

❖ One entity can be both the User & Owner

❖ Questionnaires are part of the process

o Questionnaires have varying degrees of valuedepending on the borrower

o Always insist on questionnaires

o Questionnaires must be signed and dated


ASTM E1527-13 vs. E1527-05

❖ The ASTM E 1527-13: Standard Practice for Phase IEnvironmental Site Assessments was issued onNovember 6, 2013

❖ Used in most commercial property transactions toidentify environmental liabilities, and to obtainprotections under the EPA’s AAI Rule

❖ Revised standard intended to clarify language wherethere was some inconsistency in practice


ASTM and All Appropriate Inquiry❖ November 6, 2013

ASTM published E 1527-13 standard and -05became a “historical standard”

❖ December 30, 2013

EPA published final rule recognizing -13 as AAI-compliant, announced intent to proposeremoving E1527-05 reference

❖ October 6, 2014

The EPA issued the final rule stating that as ofOctober 6, 2015, ASTM method 1527-13 will bethe only acceptable method for conducting aPhase I ESA.


ASTM E1527-13: What Changed?

Many of the changes in E1527-13 consisted ofsimplifications, clarifications, or increased detail orguidance on provisions that were already in E1527-05, which allowed Environmental Professionals (EPs)to better discuss and categorize concerns foundduring the completion of Phase I ESAs.


ASTM E1527-13: What Changed?

Significant changes included the following:

1) The inclusion of vapor intrusion;

2) Stronger stance on regulatory file reviews; and

3) Added and/or revised key definitions andincluded other clarifications that will not beaddressed in our discussion.


ASTM E1527-13: Vapor Pathway

❖ Vapor impacts must be considered, similar to theway we have always treated soil and groundwaterimpact.

❖ Potential vapor concerns were often dealt with asan indoor air quality issue in the past.

❖ Some consultants included the vapor pathwaywithin Phase I ESAs well before the standard wasissued, but many did not.

❖ Previous Phase II investigations may not haveadequately assessed the vapor pathway.Therefore, additional investigation could benecessary.


Vapor Intrusion


Components of a Phase I ESA

❖ Site Inspection & Interviews with owners, operators, tenants

❖ Regulatory Database Review

❖ Agency Research

– Building Department

– Fire Department

– Planning Department

– Assessor’s Office

– State EPA

– Environmental Health Department

– Regional Water Quality Control Board

– Department of Toxic Substances Control

❖ Historical Research



❖ Site Visit

❖ Must access all areas (otherwise Data Gap)

❖ Does not include any sampling (Phase II)

❖ Photographic documentation

❖ Must meet ASTM E1527-13 Standard (pages 17-19) and includes interior and exterior locations



Historical Research – Purports to document the history of the

property back to when property first contained structures or wasused for agricultural, residential, governmental, industrial, orcommercial purposes. Per ASTM guidelines, we attempt to obtaininformation at five-year intervals. Aerial photographs and/orhistorical topographic maps are commonly used to aid in thisdetermination.


Components of a Phase I ESAAerial photographs may document former gas stations, etc.



Sanborn fire insurance maps


No Pre-Loan Due Diligence


ASTM E1527-13: Regulatory File Reviews

❖ ASTM E1527-13 strongly encourages pertinent regulatoryfiles to be reviewed, but it is not necessarily required.

❖ The Standard does require, however, that if the EPchooses not to review files, they must give justificationas to why they were not reviewed.

❖ This requirement DOES apply to file reviews forcontiguous properties, not just the subject property.


Why Regulatory File Reviews Are Necessary

• Environmental database records rarely tell the wholestory.

• A thorough File Review can identify conditions which canbe missed through normal means.

• File Reviews also offer the best opportunity to identifymitigating information in cases where limited informationis available for a contaminated property.


These tanks were decommissioned in-place with alldocumentation, inspections, testing, and closure byOregon DEQ. Subsequent discovery has revealed yearsof groundwater leakage into the rusted tanks which hasled to large volumes of hazardous waste.

Significance of File Reviews


Proposed Changes: ASTM E1527-21

❖ Expanding the scope of historical research onproperties.

o Mandated historical research on adjacent sites andsurrounding sites, in addition to subject property.

o “Surrounding sites” definition still being developed.

❖ Clarifying the scope of site visits.

o Who is qualified to conduct the site assessment?

o Reports must include justification language if/whenEPs-in-training are sent on site visits.



❖ Controlled Recognized Environmental Condition(CREC) examples and classification system.

o Provide more examples of CRECs (sites do notpose a risk to human health)

o Clarify CREC classification language to reduceliability issues for CRE owners/developers



❖ Smaller “housekeeping” changes:

o Review of State and Federal Databases

o Identification criteria for physical setting

o Polychlorinated biphenyl compounds (PCBs) in building materials

o Clarifications and additions to definitions


Phase I ESA Reviews

❖ Key items to look for in a Phase I

o Completed questionnaires

o Chain of Title and AULs/Liens

o NFAs – use with caution!

o Regulatory agency files

o Vapor Intrusion Assessment/Screen


No Further Action Letters

❖ No Further Action letters are narrowly written

❖ No Further Action letters can be reversed

o Changes in regulations/scientific knowledge re:chemical’s risk factors

o Conditions linked to NFA are not implemented ormaintained


High Risk Properties

❖ Farms, commercial and private properties, autorepair facilities, dry cleaners, industrial sites.

❖ ALL properties can be high-risk, includingresidential (don’t be lulled into a fall sense ofsecurity).


Residential - Tank Not Registered


Surprise! No Records of a UST



Dry Cleaners / Metal Plating / Commercial Print Shops



Can you trust your records searches?

Only 4 USTs registered to the property; but a total of 5 USTs removed with associated contamination



❖ Underground storage tanks that have beendecommissioned in-place may still presentenvironmental hazards.

❖ Seeing that a tank has been “decommissioned”does not mean an environmental condition doesnot exist.

❖ Use an experienced Environmental Professional toassess site and records


Limiting Your Risk

❖ Engage a reputable database research company

❖ Reduce Data Gaps, Limitations, and Exclusions

❖ Use ASTM as a guideline; not the bare minimum

❖ Use an experienced EP to look past the research to anticipate real-life property usage

❖ Utilize a decision matrix to determine risk vs. loan value


Disclaimer❖ This presentation and information provided throughout

consists of professional opinions and recommendations madein accordance with generally accepted industry principles andpractices and are designed to provide an educational tool.Information provided should not be misconstrued as legaladvice.

❖ GІEІM makes no representation or warranty regarding theaccuracy or completeness of any information provided by thirdparty sources used by GІEІM in the preparation of thispresentation. Users of information presented herein shall takefull responsibility for the use of this information. No warrantyof fitness for particular purpose, expressed or implied, shallimply and GІEІM specifically disclaims the making of any suchwarranties. In no event shall GІEІM be liable to anyone forspecial, incidental, consequential, or exemplary damagesresulting from the reliance on any and all informationpresented.


Questions?

Contact Jonathan Green if questions are unanswered during this presentation:

• [email protected]• 855-277-5307, extension 101


COMMERCIAL REAL ESTATE

FINANCING:

DUE DILIGENCE &

LOAN DOCUMENTATION

Sarah Reed

[email protected]


CRE LOAN PROCESS

DUE DILIGENCE: UNDERWRITING

• Lender’s Underwriting Guidelines

– Determines scope of due diligence, CRE

requirements, and loan document terms

• Financial Statements

– Needed at application for underwriting

– Signed by Borrower with reliance language for

Lender

• Terms: DSCR, LTV, NOI

DUE DILIGENCE: LEASES

• Leasing supports LTV and loan proceeds

• Rent roll should match leases

• Lender will review leases for major issues– Tenancy

– Options to extend

– Early termination rights

– Condemnation / casualty repair obligations

– Ground lease concerns

• Estoppel Certificates usually required

• SNDAs may also be required

DUE DILIGENCE: ENTITY STRUCTURE

Review of legal structure for Borrower, entity Guarantors, other entities in chain of authority:

• Organizational chart

• Existence documents (formation filing with state, local registration if foreign, certificate of good standing/existence)

• Governance and authority documents reviewed for– Persons with authority to bind Borrower

– Purpose restrictions/SPE

– Bankruptcy remote provisions

– Capital calls

• Loan Resolutions/Secretary’s Certificate

DUE DILIGENCE: ENTITY STRUCTURE

Other issues in entity structure review:

• Guarantor consideration confirmed

• Trusts who are a party or in the

organizational chart

– Does the Trustee have the power to guaranty?

• Tenancy-in-common agreements

– Certain waivers may be required by Lender

DUE DILIGENCE: OFAC CONCERNS

• OFAC (Office of Foreign Assets Control of the

U.S. Department of Treasury) administers the

federal laws that impose economic sanctions

against Specially Designated Nationals (SDNs)

• Lenders must screen Borrowers, Guarantors,

and Interest Holders

• Institutional Lenders must also search other

exclusionary lists

DUE DILIGENCE: LIEN SEARCHES

Parties searched:

• Borrower, Guarantor, parties with 20%+ beneficial ownership interests, parties in chain of authority

• Seller, other entities in chain of title of property in past 5 years

Public record searches include:

• PACER – bankruptcy and litigation search

• SmartLinx (LexisNexis) – comprehensive search

• Secretary of State / state lien filing offices – search for UCCs, liens and judgments

DUE DILIGENCE: INSURANCE

• General Requirements

– Commercial Property Insurance – replacement value, including loss of rents and business interruption

– Commercial General Liability – $1MM/$5MM limits

• Considerations:

– Borrower and Lender’s legal name; coverage end date

– ACORD Certificates (current forms, no reliance)

– Notice of Cancellation to Lender endorsement

– Lender’s Loss Payable endorsement

– ACORD 75 Binder evidences insurance for purchases

DUE DILIGENCE: TITLE

• ALTA Extended Coverage Lender’s Policy

– Title Commitment (showing condition of title)

• Schedule A = Transaction

• Schedule B1 = Requirements

• Schedule B2 = Exceptions

– Pro Forma Policy

• Affirmative language

• Endorsements

• Zoning Report (PZR)

DUE DILIGENCE: POLICY ENDORSEMENTS

• Transaction specific

• Use survey and title exceptions to make determination

• Commonly include:– Commercial Environmental Liens 8.2-06

– Restrictions, Encroachments, Mineral Reservations 9-06

– Access and Entry 17-06

– Tax Parcel 18-06

– Contiguity 19-06

– Same as Survey 25-06

– Subdivision 26-06

– Easement/Building Encroachments 28.1-06

DUE DILIGENCE: SURVEY

• A new ALTA/ACSM Survey May be required by Title Company to obtain extended coverage

– What is NOT an ALTA survey

• Considerations:

– Check that legal description matches title commitment and closes

– Review for encroachments

– Review for other issues, e.g. sufficient parking, zoning notes

DUE DILIGENCE: LIEN WAIVERS

• Title companies may require lien waivers if there has been recent work on the property

• Lien waivers will need to be in a form acceptable to specific title company

– Unconditional, final

• Work-arounds

– Escrow holdback

– Indemnity in favor of title company

DUE DILIGENCE: CLOSING PROTECTION

AND INDEMNITIES

• Title insurance companies may require

owner/borrower to indemnify it in the event of

certain types of claims filed under the title

policy.

– Lenders do not like indemnity requirements

because could jeopardize borrower’s ability to

make loan payments.

• National offices/Closing protection letters

DUE DILIGENCE: OTHER ISSUES

Other issues which may arise and require

expertise:

• Construction lending

• Water rights

• Environmental problems

LOAN DOCUMENTS: TYPICAL SET

• Promissory note

• Loan agreement

• Deed of trust (or Mortgage), Assignment of leases and rents, Security agreement, and Fixture filing

• UCC-1s

• Guaranty

• Environmental Indemnity Agreement

• SNDAs

• Opinion letter from Borrower’s counsel

LOAN DOCUMENTS: SNDA

• When does Lender want/need an SNDA?

– When the lease requires an SNDA for

effectiveness of the lease

– To prevent the lease from terminating upon

foreclosure sale

– Lender wants “additional provisions” (i.e.,

confirmation of no option to purchase or

Tenant’s termination rights)

LOAN DOCUMENTS: SNDA

• Lender liability for acts of the Borrower

• Lender liability to return Tenant’s security deposit

• Offsets/claims against Landlord

• Prepaid rent

• Future amendments, assignments, subleases

• Unpaid TIAs

• Early termination by Tenant

LOAN DOCUMENTS: OPINION LETTERS

• These may be required in addition to or in lieu of legal structure documents

• Typically cover– Existence

– Authority

– Enforceability of the loan documents

• Other considerations– Where is the opinion giver licensed? What state law

is referenced?

– Trusts

LOAN DOCUMENTS: GUARANTY

• Full personal guaranty – preferred by Lender

• Other options:

– Conditional/springing guaranty

– Terminating guaranty

– Limited guaranty

– Multiple, several guarantees

– Amount of guaranty limited to loss

– Performance/completion guaranty

LOAN DOCUMENTS: SECURITY

INSTRUMENTS

• Deed of Trust (Mortgage)

• Assignment of Leases and Rents

• Security Agreement

• Fixture Filing

• UCC-1 (recorded in real property records and

filed in the state)

LOAN DOCUMENTS: LOAN AGREEMENT

• Contain the deal terms between the parties

• May contain portions of what is typically found in

the promissory note or security instruments

• Portfolio issues

– Partial release provisions

• Pay-down provisions

– Make whole premiums

• Escrows

LOAN DOCUMENTS: ENVIRONMENTAL

INDEMNITY

• Highly dependent upon the actual environmental status of the Property

• Due diligence analysis reveals problems?

– May need environmental insurance, as well

• Due diligence analysis reveals property is clean?

– Consider sunset clause

– Consider reference to the Phase I ESA

Questions?

THANK YOU!

Sarah Reed

[email protected]


CONSTRUCTION

CONTRACTS

Franklin G. LeeGivens Pursley LLP

601 West Bannock Street

Boise, Idaho 83702

208-388-1200

[email protected]

[177495-1]

OVERVIEW

Published Contract Forms

Current Design Contract Issues

Current Construction Contract

Issues

SELECTION

• Selection is the most important

step!

• Usually best to select designers

and contractors early (often at the

same time).

• Do your due diligence on

counterparty

• Recognize your negotiating

position

DUE DILIGENCE

Know your client / vendor

• Check financial condition

• Check industry references

• Check payment history

• Check litigation history

• Know the staff to be on your project

COMMON INDUSTRY FORMS

American Institute of Architects

(AIA) Contract Documents

EJCDC(Engineer’s Joint Contract Documents Committee)

FORM CONTRACTS

• Stay in the same form family!

• Don’t be shy about modifying forms

– Recognize and eliminate form

bias (will discuss later)

– Modify to address your needs

– Never assume “standard” terms

are appropriate for your deal

American Institute of Architects (AIA)

Contract Documents

• Still market leader for buildings and

for architect designed/managed

projects (although this is changing)

• Wide variety of forms available

• Terms are cultural to industry

• Terms often assumed, not read

• Often changed by unread

“Supplementary Conditions”

American Institute of Architects (AIA)

Contract Documents

• Slanted toward interests of its

authors (i.e., architects).

• Architect is center of everything

• Viewed by owners and contractors

as favoring the other in risk

allocation

• All but eliminates architect from risk

allocation

EJCDC(Engineer’s Joint Contract Documents Committee)

• Favored for infrastructure projects

designed or managed by engineers

• Like AIA forms – but more detailed

• Decidedly slanted toward interests

of its authors (i.e., engineers)

• Viewed by owners as a fair

“starting point”; contractors view

them less favorably.

• Authored by a fairly broad, but

contractor heavy, industry coalition

• Not liked by design professionals

– Immensely diminished role of

designers

– Inserts designers into risk

allocation

• Probably the most even “starting

point” of any published industry

form.

Design Contract Issues

OWNERSHIP OF DESIGN

• Default Rule – The designer owns

the design and drawings.

• Industry forms have “licenses” that

are very limited.

• Copyright infringement claims easy

to make; penalties are severe

• Recent increase in litigation

(Three filed in Idaho in last 6 months)


LIMITS OF LIABILITY (LOLs)

• Insurers require designers to

request (but not get) LOLs.

• LOLs largely enforceable in Idaho.

• Exceptions:

– When cause indemnity for own

negligence.

– When violate public policy (FHA/ADA)

• Liability caps may be OK in certain

circumstances and specialties


FAIR HOUSING / ADA

Increasing source of claims against

owners, architects and contractors

– Shocking level of carelessness

by designers, contractors

– Civil rights, not building code

– Each party has direct liability

(No indemnity or contribution)

– Limits on liability ineffective


FAIR HOUSING / ADA

• Learn the accessibility basics

• Accessibility be part of selection

• For risk projects (multi-family):

– Expert post-design / pre-

construction check

– Expert post-construction / pre-

occupancy check

Construction Contract Issues

• Scope of Work

• Payments

• Consequential Damages

• Insurance

• Financial Security

• Dispute Resolution

• Attorneys’ Fees


SCOPE OF WORK

A good scope of work is more

important than a good contract!

– Poor scope of work documents

are often the root cause of

construction disputes

– Contractor confirmation of

adequacy

If contractor won’t give it -

investigate.


PAYMENTS

• Owners

– Get Lien releases – always!

– Use proper lien release forms!

• Emerging Trend - “Integrity”

warranties for payment requests.


CONSEQUENTIAL DAMAGES

• Consequential damages waivers

are in every industry form.

• Often not mutual – Beware!

• May eviscerate deadlines – Critical

issue on time sensitive projects.

• No standard solution – Must

balance risks and incentives.


BUILDER’S RISK INSURANCE

• Always have your insurance

provider review and confirm

adequacy of coverage.

• Industry forms often require

insurance that people don’t have.

• Understand coverage, and

requirements for coverage.

• Watch deductibles.


FINANCIAL ASSURANCES

• Shell entity? Closely held entity?

Consider parent or personal

guaranty

• Bankruptcy of an owner or vendor

can really complicate a project.

If you are not comfortable – get

security or move on! (Maybe

move on anyway)


DISPUTE RESOLUTION

• Mandatory mediation is good idea

(Court will make you mediate anyway)

• Mandatory arbitration? Maybe– “Ambush by Arbitration”

– Limits on discovery and parties

– Often no less expensive

• New Trend - Limited Arbitrations– Pre-selected expert arbitrators

– Fast; limited discovery; limited scope


ATTORNEYS’ FEES

• Law very favorable to vendors

– One-way street against owners

– Award of attorneys’ fees in lien

claims is mandatory

– Electric Wholesale Supply case

$51k claimed, but $1k recovered, all

attorneys’ fees awarded ($9k)

Owners - Add contract recovery

limitation to avoid reverse leverage

THANK YOU

Questions?

Market ReportMarch 4, 2020

Contact: Greg Gaddis (208) 333-7052 I Bill Beck (208) 333-7050

Prepared for: Idaho State Bar

LEASE RATESVACANCY

RATES

TOTAL

MARKET SF

CLASS A

CORE SF

Year Quarter Year Quarter31,000,00 1,900,000

OFFICE MARKET I Boise MSA I 1st Quarter 2020

NOTABLE ACTIVITY

TANDEM DIABETES

95,000 SF @ 1500 SHORELINE DR

AMERICOR

49,000 SF @ OVERLAND & EAGLE

PROSPECTUS

65,000 SF @10 MILE & I-84

OFFICE VACANCY AND RATE

TRENDS

OFFICE CONSTRUCTION/SUPPLY

TRENDS

LEASE RATES CONTINUE TO RISE

THROUGHOUT THE MARKET.

VACANCY IS AT ITS LOWEST

POINT IN HISTORY (SUB 6%)

DOWNTOWN CLASS A REMAINS

STABLE AT 7%

NEARLY 2,000,000 SF

PLANNED/UNDERWAY IN

MERIDIAN, EAGLE AND

DOWNTOWN BOISE

NEW CLASS A CONSTRUCTION

LEASE RATES START AT $25/SF

FLSV

LEASE

RATES

VACANCY

RATES

CONSTRUCTI

ON

TOTAL

MARKET SF

Year

Quarter

Year Quarter Year Quarter46,100,00

INDUSTRIAL MARKET I Boise MSA I 1st Quarter

2020NOTABLE ACTIVITY

VERDE FULLFILLMENT

168,000 SF BUILD TO SUIT

KEYSTONE BUILDING

NEW 60,000 SPEC IN CALDWELL

350,000 SF

SHOPKO DISTRUBUTION CENTER

SOLD/LEASED TO SOLITICO

INDUSTRIAL VACANCY AND RATE

TRENDS

INDUSTRIAL

CONSTRUCTION/SUPPLY TRENDS

LEASE RATES CONTINUE TO RISE

REACHING INTO THE .70/SF+

RANGE FOR NEW PRODUCT

TOTAT VACANCY IS AT ITS

LOWEST POINT ON RECORD –

2.9%

NEW CONSTRUCTION NOT

KEEPING UP WITH DEMAND.

OVER 1,600,000 SF DELIVERED IN

2019 UP FROM 1,200,000 SF IN

2018



2019 FACTS:

• Office and Industrial lowest vacancies and highest

rents on record

• Office - over 750,000 SF positive net absorption

• Industrial – nearly 1,700,000 SF positive net

absorption

• 28 office buildings over 20,000 SF sold (12% of

inventory)

• 46 industrial buildings over 20,000 SF sold (11% of



CONSTRUCTION EVERYWHERE!



SIGNIFICANT OFFICE AND INDUSTRIAL CONSTRUCTION

IN THE VALLEY:

• BALL VENTURES ALQUIST:

• OFFICE: 1.5 MILLION TO DATE, 1.2 MILLION

CURRENT, 2.5 MILLION PLANNED

• THE SUNDANCE COMPANY:

• OFFICE: 20,000 SF IN 2019 – 200,000 SF TO DELIVER

IN 2020/21

• ADLER INDUSTRIAL

• INDUSTRIAL: 130,000 IN 2019 – 550,000 SF TO

DELIVER 2020

• STRIDER GROUP

• INDUSTRIAL: 150,000 IN 2019 – 100,000 SF TO

DELIVER 2020

• RAFANELLI NAHAS



2019 TRENDS WILL CONTINUE :

• Out of area investors purchasing large Boise

properties

• Off-market deals…not just investor sales

• Out of area companies moving to Boise….it’s

happening and not just what you hear from the

Chamber!



WHAT ARE THE REASONS OUT OF AREA COMPANIES

ARE EXPANDING AND RELOCATING TO THE BOISE

MSA

• STATE OF IDAHO INCENTIVES

• CHEAP UTILITIES

• OUR POPULATION GROWTH

• QUALITY OF LIFE

• IDAHOS MINIMAL BUSINESS REGULATIONS (OR

THE ONEROUS REGULATIONS IN THEIR CURRENT

STATE)

• TAX POLICY

BUT THE # 1 REASON COMPANIES CHOOSE TO

LOCATE IN BOISE….



THE ABILITY TO HIRE AND RETAIN LOYAL

EMPLOYEES

ONCE HIRED AND TRAINED, THERE IS

LITTLE RISK OF LOSING THEM TO

AMAZON, MICROSOFT, UBER AND

OTHER 1,000 POUND GORILLAS!



WHAY TYPE OF COMPANIES ARE MOVING HERE?



2020 Market Issues and Consequences:

• Lack of options for Tenants and User buyers

• Read your renewal option!

• Construction not keeping up with demand

• Rates will continue to rise

• Construction and Tenant Improvement costs

• This can but not always kill deals

• Parking (surprise!)

• Get on a waiting list!

Thank You!BILL BECK

(208) 333-7050

[email protected]

GREG GADDIS

(208) 333-7052

[email protected]

TenantRealtyAdvisors.com I 950 W. Bannock St, Ste 410 Boise, ID 83702

Rick Triola

February 2020

The RON 411

IDAHO

NotaryCam Proprietary and Confidential

Agenda

• Introduction

• What is an eSignature, Really?

• What is Electronic Notary?

• What is RON?

• Where is RON?

• Why RON?

• Considerations for Starting

2


Introduction

About me:

• Rick Triola

• Founder and CEO of NotaryCam (first transactions in

2012, company founded 2014)

• Notaries primarily in Virginia; also Montana, Texas,

Nevada, Tennessee.

• >250k transactions

• >145 countries

3


What is an eSignature, Really?

“an electronic sound, symbol or process that is attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

4

Various

samples of

“Original”

Signatures!


What is RON

6

• Remote, not in person

• New ID proofing tools and methods

• Video

• eSignatures (typed or holographic, includes Audit Trail)

• Tamper Seal (Digital Certificate)

• PDF


How RON Works

7

1: Upload Docs• Mobile or Web

2: Authenticate/Request

Notary

• Identity Proofing (Knowledge Based Authentication, Credential analysis, etc), then connect with a live notary

3: eSign

• Securely eSign docs that are then eNotarized

4: Secure Storage

• Docs are routed and stored for future access. Video and transaction history are also maintained


Demo

8


ID Proofing: Is This Person Who They

Say They Are?

• General Guidelines:

• Use third party tools

• Knowledge Based Authentication (KBA)

• Credential Analysis

• Human Knowledge (Notary Role)


Knowledge Based Authentication (KBA)

• Dynamic (not Static)

• Minimum of 5 questions

• Minimum of 5 possible answers

• 80% passing score

• 2 minute time limit per attempt

• 2 attempts permitted in any 48 hour period

• Retakes require at least 40% of questions (2) are replaced.


Credential Analysis

• AKA “ID Scan”

• Image of Gov’t Issued photo ID is captured (webcam, phone)

• Verification Services uses tools such as:

• Optical Character Recognition (OCR)

• Barcode analysis

• Machine-Readable Zone (MRZ) codes

• Checksums

• Microprint

• Fonts, size and location of text and other features

• Watermarks

• Holograms

• Expert Human Review


Other Possible Tools

• Other methods, such as those noted below, are contemplated but the

specifics of other methods are not fleshed out yet.

• Biometrics

• Facial

• Voice

• Fingerprints

• Trusted Third Party


Notary’s Role in ID Proofing

• Review results in journal

• See ID on camera, compare to submitted ID, and signer

• Other ID Methods:

• Credible Witness

• Personal Knowledge

• Experience, Wisdom, Caution!


Other requirements

• Tamper seal → Digital Signature

• Audit trail

• Notary journal

• A/V recording (stored 10 years minimum for ID Notaries)

14


Where is RON? Everywhere.*

15

*In theory

• Interstate recognition--state and federal law; Full Faith and Credit Clause of US Constitution

• eNotary is explicitly recognized by Federal law (ESIGN Act) and almost every state’s laws—UETA adopted by 47 states, others have similar.

• ID’s RON laws effective January 1, 2020• eNotary

• RON

• “Papering out”

Enacted RON Law Active RON bill

Current Legal Landscape

Source: www.mba.org/audience/state-legislative-and-regulatory-resource-center/remote-online-notarization

16


Effective Dates

* Awaiting governor’s signature. † Hybrid. ‡ Originally effective 2015. Revised in 2018.

• Note: most states authorize/require Secretary of State to promulgate corresponding regulations


Why is RON a big deal?

18

• Convenience

• Cost

• Possibility for improved workflows and faster turn times

• Makes in person eNotary (more) relevant

• Security and auditability


Online Notary Solving Real Life Problems

19

“Selling our house from overseas greatly simplified

being able to use Notary Cam. Recommended by our Title

Attorney. Henry responded to our questions and concerns

about available methods for Identity Validation. And Toni

served as our Notary, establishing the video meeting

session, guiding us through the documents, then providing

payment and encrypted final sealed documents to us and

the Title company. Both Henry and Toni created positive

impressions through experience with us. NotaryCam staff

are all Accessible, Available, Professional, Courteous,

Competent, and Friendly. Well Done and Thank You. One

less hassle or roadblock removed from the

process of selling / closing from different time

zone.” JB Lyman

“Fantastic service. We were out of the

country for the closing of our house

sale and NotaryCam came to the rescue in

helping us easily, legally and securely sign our

closing documents. Thanks so much!”

Wes Hall

“NotaryCam truly saved the day. We had to

coordinate getting 5 people to sign with a

notary and we only had one day to do itotherwise our home sale was going to fall apart. If

we didn't have NotaryCam as an option there is no

way we could have gotten everyone to take time out

of their busy day to meet with a notary on their own.

They made it incredibly simple and effortless for

everyone involved. Now I know exactly who to come

to next time I need a notary.” Katy Fetsch

"I will bet that you didn't know that you

provide accessibility for people with

mobility limitations! I am

quadriplegic due to a

neuromuscular disorder and

find that dealing with normal

procedures for getting

notarized signatures to be on

the verge of impossible for me.

You have opened a window for me!

Thank you!“ Lisa M. Sapp


Improve success rates

• Make sure clients know what to expect

• Understand and communicate ID requirements

• Start with seller side

• Talk to lender partners early

• When in doubt, get approval from recipient

20


21

www.notarycam.com

Rick Triola

[email protected]

Q&A